DC Tip Credit Wage Is Not a “Happy Status Quo” for Restaurant Workers

I used to work for McDonald’s government relations department. So I’m quite familiar with protests voiced whenever a minimum wage increase looms on the horizon — basically, the same old, same old every time.

This is also true for alarms sounded whenever there’s a murmur about increasing — or eliminating — the tip credit wage, though McDonald’s didn’t line up with the opponents here.

By the same token, I’m familiar with the lead advocates for the restaurant industry, including the Employment Policies Institute — one of the tax-exempt revenue-raisers created by lobbyist Rick Berman.

So I was hardly surprised to see the Institute’s Research Director Michael Saltsman warning Washington Post readers of the dire consequences of raising the District’s tip credit wage, as one of the minimum wage bills the DC Council is considering would do.

I don’t want to delve into Saltsman’s numbers. I should, however, point out that he adds a dollar to what the tip credit wage would be in 2018, when the proposed four-year phase-in would end. The correct figure is $7.75, which presumably would produce a somewhat different cost calculation.

Still, Saltsman is right about this much. Labor costs for some restaurant owners would be higher — as would labor costs for other tip credit employers that now rely on us consumers to subsidize their payrolls, e.g., hotels, parking valet services, hair salons.

And so we get the usual litany of harms to small business owners — and to workers — that the restaurant industry and its hired guns roll out whenever a mandatory wage increase is proposed.

Owners couldn’t make a profit because they can’t raise prices enough to cover their higher labor costs. Restaurants are doing just barely okay now, Saltsman says, when the average wage for a tip credit worker is something (unspecified) over $13 an hour.*

Assuming, as we shouldn’t, that tip credit employees work full-time, year round and never have to take any unpaid time off, they earn somewhat over $27,000 a year — or about 37% of basic living costs for a D.C. parent with one child.

This, for Saltsman, is a “happy status quo” that the proposed tip credit wage would destroy.

The independently-owned restaurants that are springing up in our gentrifying 14th Street corridor couldn’t survive, he says. Which, if true, tells you something about how those restaurants are managing to keep their doors open now.

We’ve heard the same arguments about profit margins too narrow to allow for any mandated wage increase for as long as I can remember.

Yet both the federal government and states have increased their regular minimum wage rates, which apply to all workers in the kitchens — and to all staff at restaurants where tips aren’t customary. We still have lots of places to go out to eat — and a whole lot of McDonald’s restaurants.

We’ve also heard for I don’t know how long the scare stories about job losses, due not only to restaurant closings, but staffing reductions. Yet restaurant job growth has outpaced total job growth for 14 years.

Saltsman cites what’s reportedly happening in Seattle, where, as in the rest of Washington, there is no tip credit wage — and a regular minimum wage that’s long been adjusted annually to keep pace with consumer price increases.

Restaurants there, the columnist he links to says, have eliminated bussers, forcing wait staff to pick up empty plates, etc. And they’ve allegedly cut back on other staff too.

I’m not persuaded that the lack of a tip credit wage has given owners no other choice. Businesses will generally manage with as few employees as they can and still keep customers satisfied enough to come back. They’ll tank if they try to manage with fewer. And they know it — or find out the hard way.

Which brings me to Chili’s, Saltsman’s other case in point. It’s putting tablets on tables — though not, at this point, to substitute for servers, as he claims.

What Chili’s is really trying to do is give customers some amusement (at a small extra charge) while they wait for their food and to get them out faster when they’ve eaten. In other words, it wants to improve the customer experience (and make way for more customers quicker).

This customer, for one, doesn’t want to splurge for a white-tablecloth restaurant meal and sit around twiddling her thumbs (or playing a computer game) until a server belatedly arrives to take her order — let alone tap it out on a computer screen.

And if I want self-service, another job-killing possibility Saltsman cites, I’m surely not going to go to a restaurant that once had tipped employees. I’m quite certain I’m not the only customer the restaurant would lose.

I will, however, expect to pay somewhat more for my meals if the tip credit wage is raised substantially. This seems to me a reasonable price to pay for knowing that the people who wait on my table may actually take home a good bit more than the minimum wage.

On the other hand, I could have more money in my wallet because fewer servers, bartenders and other tip credit wage employees would be so poor as to have to rely on safety net benefits.

That, to me, would be a better win-win than the “happy status quo” Saltsman wants our local policymakers to preserve.

* This figure, which I can’t check, is for all tip credit wage workers, not just those employed by restaurants. However, it’s about right for waiters and waitresses in the District, excluding those who work in cafeterias and coffee shops, according to last year’s figures from the Bureau of Labor Statistics.


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